The Securities and Exchange Board of India has issued a show-cause notice to FTIL, the holding company of Jignesh Shah’s group, asking it to explain how it can continue its investment in MCX-SX.

Sebi’s action comes just a day after the Forward Markets Commission ruled that Shah and his company FTIL were not ‘fit and proper’ to run any exchange. Under Sebi rules, if any other regulator decides a company is not ‘fit and proper’, then the stock market regulator, too, can withdraw the licence to the company to operate a stock exchange. FTIL has just seven days time to respond to the show-cause notice.

With the FMC’s order, Shah and FTIL will have to sell their 26 per cent promoter holding in MCX, as they can’t hold more than 2 per cent in the bourse.

The FMC ban came in the wake of a Rs 5,500 crore payment settlement crisis at NSEL, which is now being probed by multiple agencies.

“Keeping in view the foregoing observations and the facts which reveal misconduct, lack of integrity and unfair practices on the part of FTIL in planning, directing and controlling the activities of NSEL, we conclude that FTIL does not carry a good reputation and character, record of fairness, integrity or honesty to continue to be a shareholder of MCX,” FMC said.

Meanwhile, FTIL and Shah on Friday moved the Bombay High Court, challenging the FMC’s order. The petition has requested for quashing the FMC order.